Mortgage rates have been incredible the last few months, and that has sparked a refinancing boom. Incredibly, the number of refinances actually tripled year-over-year for one week in October. The amount of refinancing has generally been up significantly in recent weeks.
In the week ending October 12, the Freddie Mac Primary Mortgage Market Survey showed an average rate of 3.57% on 30-year fixed-rate mortgages. That rate was more than a full percentage point under the 4.71% that loan type was averaging the same week in 2018.
These low rates are extremely compelling to homeowners. In fact, refinance applications were up 199% year-over-year (YOY) that week, according to Mortgage Bankers Association Vice President of Economic and Industry Forecasting Joel Kan. In other words, refinancing activity effectively tripled. MBA data also revealed that the unadjusted Purchase Index was 12% above what it was the same time last year. Kan said that showed how much stronger the purchase climate is in 2019 than in 2018.
Refinancing generally more than doubles 2018 activity
The refinance boom is of course not occurring just during a single week. Additional MBA data from the week ending October 5 reveals the divergence of the two activities (refinancing vs. new mortgage applications). While refinances shot up 10%, mortgage applications increased just 5.2%. That same week, refinancing was occurring at a 163% greater rate YOY. Nearly two-thirds (60.4%) of mortgage applications that week were refis.
Current mortgage holders vs. homebuyers
Refinancing is in a boom, but the same is not true of home sales. That is surprising at first glance since it seems the low mortgage rates should appeal to anyone who has or is thinking about getting a mortgage. Kan believes that what is keeping the numbers low on home sales is “the cloudier economic outlook and ongoing market uncertainty.”
Why refinancing might make sense
There are various reasons that people are refinancing – and that you might want to as well. You may want to refinance if you currently have an adjustable-rate mortgage and would like to get into a fixed-rate one. You may want to borrow more than what you owe on the current mortgage in order to have the excess available for other expenses, such as home improvements. You may simply want to lower your monthly payment and get a better interest rate.
Considerations you want to assess when you approach the possibility of a refi include the potential for an improved loan type, the closing costs, the length of time you plan to live in your home, and the ability to cut down monthly bills.
Refinancing advice you can trust
Are you considering a refinance and need some expert consultation? At Ted Bougie – First Equity, our goal is to create lasting relationships with each and every client. Get today’s rates.